Dear Neighbors,

Many of the questions coming to the office ahead of next week’s Special Meeting to discuss the

proposed Special Assessment of $15,000,000 are not specifically related to the Special

Assessment. We have received questions pertaining to the need for the work, the Engineer’s

estimates, the 20% contingency, financial oversight of construction expenses, and the like. These

are all good questions, and all of them have been discussed and presented over the past year-

some many times. All the presentations and meeting minutes are available on Concierge Plus for

your review.

The purpose of next week’s meeting is only to discuss the proposed Special Assessment. This

seems a good moment to give a summary of our progress to date, so that we can focus on the

Special Assessment itself at the meeting. As this work has become so all-consuming for us, this

summary could perhaps be called a report on the “State of the Building”.

SO FAR:

1. The 40-year building inspection is required by law and covers life/safety issues such as

structural and electrical. An engineer, Frank Morabito, was hired in 2018 to do an

inspection of the building and provide an initial estimate of what would be required in

terms of the 40-year inspection, which comes due later this year. Among other things,

that estimate indicated that the concrete damage observed would begin to multiply

exponentially over the years, and indeed the observable damage such as in the garage has

gotten significantly worse since the initial inspection. When you can visually see the

concrete spalling (cracking), that means that the rebar holding it together is rusting and

deteriorating beneath the surface.

Please note that the original scope of work in the 2018 report has expanded. The concrete

deterioration is accelerating. The roof situation got much worse, so extensive roof repairs

had to be incorporated. Other previously identified projects have been rolled under the

main project. New problems have been identified. Also, costs go up every year. This is

how we have gone from the estimated $9,128,433.60 cited in Frank Morabito’s 2018

report, to the much larger figure we have today.

2. A committee was formed to evaluate possible Supervising Engineers to oversee this

work. That committee recommended Frank Morabito as the Engineer. Morabito was

selected as our Engineer by the Board in 2019.

3. A Manager with 40-year experience and an engineering background was hired (Scott

Stewart).

The above work was accomplished over a 2-year period through several different Boards. The

process has continued with the current Board:

4. Contracted Morabito as the Supervising Engineer. He identified additional professionals

such as landscape architect, architect, and MEPF (mechanical/electrical/plumbing/fire)

engineer. Those professionals are identified by name in his contract, and their

professional fees are accounted through Morabito. We are currently working with a

different MEPF engineer than originally identified.

5. Morabito carried out a much more detailed survey of the property. He recommended the

work proceed in stages:

a. An initial exploration of the concrete and driveway soffit. This was bid out and

done last year. In addition, all balconies were checked, and loose stucco and

concrete knocked off the building wherever observed, for safety reasons. It was

also found that a firewall is missing between the lobby and front driveway, which

must be put in. This firewall is an example of a new issue not identified in the

original, more general 40-year assessment in 2018.

b. Roof repair and OSHA roof anchor placement (these are tiebacks and safety line

points for people on the scaffolding and are required). This work will begin in the

next few weeks. It includes other previously identified and necessary work such

as AC disconnects, electrical on the roof, and exhaust fans. The anchors will

remain in place permanently and can be used by window washers or with future

scaffolding if we do other projects.

A moisture survey was done to evaluate the roof last year, showing the need for

extensive repairs. For most efficient project management and to contain certain

costs (value engineering), the roof was rolled under Morabito’s supervision. The

roof is part of the 40-year inspection.

c. The main project involving concrete and waterproofing and all related projects.

Phase 2c is by far the largest phase. The bid package is being worked on now. We

expect to have a Board meeting to discuss various design and code issues on April

20, 2020. Morabito is expected to present the Phase 2c bid package to the Board

at a meeting on April 22, 2021. We hope to conclude bidding and open bids at a

meeting on June 8, 2021.

6. The Board identified a lender to accomplish this multi-year project. The loan has been

through underwriting, the paperwork is in process and according to the Commitment

Letter from Valley, must close by April 25. This is the second lender we have worked

with.

(There was a previous deal discussed with Banco Popular for a number of months, and a

Special Assessment conversation to match, but that deal did not go through.)

7. We have now arrived at the Special Assessment to pay for the work and the loan from

Valley.

In addition, we have reviewed and updated internal administration to cope with this project:

• Implemented a sealed blind bid process

• Outsourced bookkeeping and accounting services

• Added electronic voting and survey capability

• Hired an assistant to help with the workload in the office so the Manager’s primary focus

can be these projects

• Instituted more formalized and firm collection procedures through Becker, our law firm

• Conducted Member votes to:

o identify exterior paint color scheme

o combine straight-line Reserves into a pooled system for simplicity

o waive Reserve contributions for 2021 while we understand the full financial

impact for our Members

o identify any additional, elective projects the Membership wanted to do such as

renovating the BBQ area or upgrading the gym. None of these additional projects

passed and you are not being assessed for them.

Other considerations:

• Sprint/T-Mobile is doing work on their equipment we must coordinate with, and hope to

see accomplished either before our roofers get up there, or cooperatively. Cooperating

with any of their work is a requirement of our contract with Sprint.

• Valley, our lender, requires 100% of our banking business. We will begin moving our

accounts over this month. Since Valley belongs to both the ICS and CDARS programs,

all our money there will be FDIC insured. The simplicity of one bank will allow easier

tracking of all bookkeeping. Given the amount of money involved, I think all will agree

that simplicity and clarity are good things.

• There has been a lot of discussion about the shutters and windows on individual units.

Depending on the age, condition and code compliance of the shutters and windows on

your units, it is possible that you, the unit owner, would have to pay to replace the

windows, sliders, and/or shutters on your unit. This has been discussed multiple times.

There will be much more specific conversation on this topic in the coming weeks as

information is developed.

THE EXPENSES

The estimated budget from Morabito for the work INCLUDES the following:

1. 40-year and related repairs. Because so much of the needed concrete/waterproofing work

is underground, we must pull up almost the entire ground level of the lot to access the

areas that require repair. That means we have to put it all back at the end. This includes

the pool deck, the entire entry drive and ground level parking, north side contractor

parking, and planters/landscaping. Electrical work and plumbing are involved almost

everywhere. Balcony concrete requires repair/waterproofing, and the railings require

repair. And- we have to bring all this up to current code when repairs are completed.

2. All common area windows and doors, which are at the end of their useful lives.

3. Generator, fire pump, and water pumps. This was originally a separate project and

assessment, but was rolled into the larger project last year for more efficient project

management. We have to bring in a gas line for the new generator.

4. Additional work that is needed in the building. An example of this would be the shade

sail that blew away in a hurricane; the frame is at the end of its life anyway. There is no

point in replacing it right now. Therefore, it is included in the project to be done at the

proper time, when the preliminary work is completed. Access controls on the pool gates

that have been unreliable for years and clearly require replacement would be another

example. There are multiple smaller items such as these throughout the property. Also,

the Party Room AC compressor and air handler and miscellaneous duct work had been

approved and assessed for, but postponed until now. The storage units are in poor

condition, including some which are rotted and/or soaked in sewage from repeated pipe

breaks over the years.

5. Soft costs like parking, permits, legal fees, etc. We will be more fully discussing parking

in the near future. About a third of the parking spaces in the garage will be blocked at a

time for concrete repairs, and upper deck parking will not be available for long periods of

time either. More to follow on this. We must identify an alternate location for our

residents and guests to park, and are investigating possible locations. Offsite parking also

would include security and possibly extra valets.

6. Performance bond, which is tied to the cost of the bid/project. It is also related to the

credit status of the contractor and may vary between 2-3% depending on the vendor. This

is added at the end of the bid separately because it is based on these factors, but it all goes

to the bottom-line number of an individual bid. At the opening of bids in each phase of

the process, Morabito will present a bid analysis to the Board and this cost is part of the

discussion, as it was when the Board selected a vendor for phase 2b, the roof project.

7. A 20% contingency. The 20% has been recommended by Morabito because of the age of

the building and the huge scope of work that is needed. If there are change orders,

different quantities, or higher bids than expected we must be able to deal with it. All of

those questions are covered by the contingency. Inflation, increasing transportation cost

and increases in cost of goods generally is already being built into bids. The longer we

wait, the higher the bids will be.

As an example of why we have a contingency, there have been seven change orders to

date totaling $245,990. We do not expect change orders to continue at this rate, although

they can happen at any time.

Also, when performing any concrete restoration work, it is impossible to know the extent

of the damage to the underlying rebar until the concrete is opened up. Oftentimes the

damage is more extensive than can be determined by inspection of the surface.

This is by no means a complete summary. Please review the Engineer’s estimate, which is on the

website and attached to this letter. As we go through the process, estimates become more

detailed and more accurate but will not be firm until project completion. For planning purposes,

we need to use the estimates provided by Morabito. His experience and expertise in this area are

part of his job, and as our licensed engineer he has oversight on the job as a whole.

A lot of this work could have been done or planned for in years gone by. But this is where we are

now.

The estimated budget from Morabito DOES NOT INCLUDE the following:

1. Needed interior repairs (formerly known as “The Hallway Project”) including carpet,

paint, unit door locks, baseboards, crown molding, etc. We also need to finish the last

piece of the elevator replacement project from several years ago, which is the

refurbishing of the elevator car interiors. This work has been planned and discussed for

many years now. This work was deferred until the proper moment in the large project,

but it still has to be done.

We must upgrade our lighting in the residence hallways for the 40-year inspection. That

can be included in the 40-year estimate. The rest is additional cost above the

$14,980,117.88 estimate from Morabito.

The proper time for most of this work is after the fire exit doors are changed (sealing the

building envelope on the residence floors), and after the lighting work is done, so likely

in 2022.

Some of these items may require Member vote on material alterations such as color

changes etc. These votes will be held as needed, as we progress towards the various

projects.

2. Engineering fees. $546,900 estimated plus any additional engineering services not

specified in the contract, which are billed hourly (change orders).

We have final numbers for the portions of the work that have already been completed- Phase 2a,

the concrete exploration. Everything else remains an ESTIMATE. The final exact cost of the

total project will not be known for years. We must work with estimates. Therefore, the estimates

we are working with are:

Engineer’s Project Estimate $14,980,117.88

Engineering Fees Estimate $546,900

Hallway Work $722,077.62

Total needed for all projects: $16,249,095.40

THE MONEY:

We have some cash on hand:

Special Assessment 2020 began life as SA2016 for the Hallway Project. Some money from this

fund was repurposed in 2019 to create the fund for the generator. A few months ago, the current

Board repurposed the remaining money as SA2020, to give us some cash to get our projects

launched while working on the bank loan. This money will be used BEFORE accessing the

credit line; that will delay the moment we have to start borrowing/incurring interest charges. The

balance in this fund according to the January 2021 balance sheet is $247,724.74. When these

funds are depleted, this Special Assessment will be closed out.

Special Assessment 2019 was done for generator, fire pump, fuel tank and some smaller items.

It was created partly by repurposing some of the hallway money, and the rest through assessing

the Members directly. The projects connected to this assessment have been rolled into the larger

project for efficiency and are still pending. A few months ago, the current Board repurposed this

money, again for cash flow reasons while the bank loan is still pending. This money will be used

BEFORE accessing the credit line; that will delay the moment we have to start

borrowing/incurring interest charges. The balance in this fund according to the January 2021

balance sheet is $459,279.22. When these funds are depleted, this Special Assessment will be

closed out.

Reserves as of the January 2021 balance sheet are $777,435.22. Some of this money

($221,335.66) is segregated as an elective Reserve fund for our insurance deductible. This leaves

$556,099.56 in statutory (required by law) Reserves. As it will be difficult or impossible to get

another loan for some years after this bank loan closes, this Board feels it would be inappropriate

to spend our Reserves for these projects. We need to conserve some cash in the event of an

emergency.

So, the total cash on hand for our projects is:

SA2020 $247,724.74

SA2019 $459,279.22

TOTAL CASH ON HAND $707,003.96

There are specific procedures outlined in the bid documents and vendors’ contracts regarding

billing/payment and several layers of oversight before any bill is paid or any draw authorized by

the bank. The bank has internal procedures as well:

• The contractor submits bills which must be supported by documentation. This is above

and beyond the physical inspections of the work which are ongoing and are done by the

Engineer, the Town, and the Manager. The bank may also send an inspector.

• The Engineer reviews every bill and may deny it or request further documentation before

passing it on. Once satisfied, the Engineer signs and seals the documents and forwards to

us.

• It is reviewed by the Manager, who generates a check request including all the

documentation.

• All check requests are signed by two Board members.

• The bookkeeper (at Sharma and Associates) will review the bills and check requests to be

sure that no bills are being paid more than once.

• All checks are signed by two Board members. We will have a pool of four Board

members who are check signers and will review all bills and checks requests. This is our

normal procedure for all bills at CTS; which particular Board members review any given

bill or check request is typically a function of their availability at the time.

• Any draws on the line of credit must be reviewed with all documentation by the bank

according to their internal procedures prior to releasing any money, which will be held in

a segregated account.

• All expenditures and bank draws will be reported monthly to the Membership as part of

our financials.

In terms of the project, our cash needs are:

PROJECT ESTIMATE $16,249,095.40

CASH ON HAND -$707,003.96

AMOUNT NEEDED FOR ASSESSMENT: $15,542,091.40

In Conclusion

For those who wanted a better understanding of the projects, I hope this helps. For those who

believe we are assessing too much, this shows that we are actually under-assessing a bit

according to estimates. For those who wanted to understand what we are doing with current

funds, hopefully that is clearer now.

For everyone, I acknowledge that we are talking about a huge project and a very large

assessment. Your Board of Directors is working very hard to bring this project to fruition. We

have consulted with our professionals: Engineer, CPA, and attorneys with regard to what needs

to be repaired, how much it will cost, and how to finance it. We will continue to do so moving

forward.

There are many moving parts to this project. We have covered so much ground already to get the

project rolling, it’s not surprising everyone is still asking about those items. Everything reviewed

in this letter has been publicly presented, discussed, and voted on as necessary. We have

discussed, debated, and argued for years now, and will continue to do so for years to come as

different items come into play. Other than the future meeting dates, none of this information is

new- my hope was to provide a relatively quick summary document to avoid having to

constantly search the website for information. I’ve attached copies of the project estimate,

hallway estimate, engineer’s contracted fees, and the January 2021 balance sheet for your

reference.

I wish everyone the best, and look forward to seeing you all next week.

Sincerely,

Jean Wodnicki

President, Board of Directors

Residence Floors Estimates (Hallway Project)